How economics deals with the free rider problem

1. The free-rider problem is a problem that occurs on public property. It means that an individual in the economy consumes more resources than his fair share, or bears less than his fair share of production costs. It refers to people who need some kind of public good, but declare that they don't need it in advance, and after others pay to get it, they can enjoy the fruits without work.

It is often referred to as the consumption of public goods in macroeconomics.

2. Free riding behavior hinders the automatic adjustment process of the market. Therefore, a successful ideology must be able to overcome "free-rider" behavior, which is a central issue of all ideologies. In North's view, ideology is a way of behaving that makes behavioral decisions more economical by providing people with a "worldview."

3. The non-exclusivity and non-competition of the consumption of public goods make the consumption and production of public goods have their own characteristics, and at the same time bring a serious problem to the market mechanism - the problem of free riding. The free-rider problem often leads to market failures, preventing the market from becoming efficient.

The so-called "free-rider phenomenon" refers to the positive externalities generated by something, and the so-called externalities refer to the economic activities of economic agents, including manufacturers or individuals.

Non-market impact on others and society. There are positive and negative externalities.

Positive externalities refer to the fact that the activities of a person's economic actions benefit others or society without the cost to the beneficiary. Negative externality refers to the fact that an individual's economic activities cause damage to others or society, and the person who causes the external uneconomy does not bear the cost for it.

Examples of hitchhiking can also be found in everyday life.

For example, many shipping companies refuse to build lighthouses in order to get the same service. This free-rider problem affects public policy.

Smooth formulation and effective implementation. Hitchhiking refers to the behavior of obtaining more benefits than oneself in a group without paying a cost, or with the help of the group when the cost is small. From the relationship between "economic growth theory" and "economic development theory", it can be seen that "economic growth theory" and "economic development theory" are important economic theories related to economic growth and economic development, and they are objective requirements for economic development.

Economic growth is achieved by an economic entity by increasing the scale of production and improving the operating structure, and the premise of economic growth is the expansion of the scale of production and the factors of product production.

Optimal combination. The key to the theory of economic growth is to quantitatively analyze the current state of productive capacity and the degree of development in order to achieve economic growth. The expansion of factors of production capacity is related to the combination of factors of production of products.

The expansion of the factors of production refers to the tremendous expansion of the production capacity of products, which has led to an unprecedented prosperity in product production. However, the expansion of product production capacity has also produced corresponding problems, in the case of homogeneity, the product production capacity has undergone a huge change, due to the increase in production capacity, but also the growth trend of production capacity has changed.

Hitchhiking is to borrow other people's resources for your own convenience at no cost. The first steamship company does not manufacture tower lights, the second is to watch others set off fireworks, the third is to dry food in front of others, the fourth is to sell their own specialties in tourist attractions, and the fifth is to enjoy the preferential policies with everyone.

The free-rider phenomenon in economics, to give the following examples from life:

For example, many steamship companies are reluctant to build lighthouses, and they can get the same services, and this free-rider problem affects the smooth formulation and effective implementation of public policy. The high welfare policies of European countries are also examples of the free-rider problem, in which the high taxes paid by the high-income earners are "free-riding" by the low-tax contributors who also enjoy the high benefits.

Li Zhiping, Yuan Guoliang hitchhiking ( It is a phenomenon that can often be seen in collective decision-making activities, and it is also an important issue in the study of public choice economics and new institutional economics. Douglas North, who is known for his use of institutional theory in his analysis of economic history, argues that the existence of the free-rider problem makes the neoclassical method of fundamental analysis, the cost-benefit comparison, no longer plausible to explain the phenomenon that people still act when the benefits of an activity are less than the costs. However, these phenomena can be seen everywhere in social life, such as voluntary anonymous blood donation, voluntary labor, etc.

Therefore, in order to better explain reality, economics needs an ideological theory that compensates for the bias of individualistic rational calculations in neoclassical theory. Does economics really need a theory of consciousness formation to complement the traditional approach to individual utility function decision-making? What are the causes of free-rider behavior, and can it be effectively overcome?

This article attempts to do this. 1. The free-riding neoclassical homo economicus assumption in collective decision-making implies that individuals are rational and information is free. The market can complete the process of allocating resources in an instant, and the allocation process does not cost any fees (transaction costs).